Vietnam may face summer power crunch due to tight coal supply, costly imports

Vietnam may face a power crunch in summer as thermal coal supply tightened after some domestic companies failed to provide the committed volumes, state-run utility Vietnam Electricity, or EVN, said March 30.

The country's domestic coal supply has tightened at a time when global seaborne prices have surged in the wake of the Russia-Ukraine war.

Vietnam -- which meets a third of its electricity demand via coal -- typically imports volumes from Indonesia and Australia. The country been slow in procuring coal this year amid trade flow disruptions due to the war and elevated prices.

EVN said coal suppliers Vinacomin and Northeast Corporation were unable to provide enough volumes over January-March. Coal supplies by the two companies over the period fell short by 1.36 million mt against total commitments of 5.85 million mt.

"Despite efforts from Vinacomin and the Northeast in securing supply from their domestic production and imports, it is likely that the coal shortage will continue in the coming months, causing difficulties for EVN to ensure power supply in the dry season from April to July," EVN said in a statement.

Vinacomin said March 29 its operations were severely affected by the pandemic between late February and early March, with close to 80% of its workers in the Quang Ninh province -- home to Vietnam's coal industry -- infected by COVID-19. Vinacomin did not respond to a request for comment on EVN's March 30 statement. Northeast could not be reached for comment.

Many EVN power plants, which have more than two units, have suspended operations at one unit due to low supplies and are running the other units at a capacity of 60%-70%, EVN said. Total capacity of 3,000 MW at EVN's coal-fired power plants was idled due to the shortage.

Vietnam's Ministry of Industry and Trade on March 11 asked Vinacomin and Northeast to ensure sufficient coal supplies to power plants "at all costs". The ministry made the request after receiving complaints from several electricity producers, who claimed that they received only 69% of the committed volumes from the two companies.

Vinacomin had raised its coal production target to 41 million mt in 2022, from an earlier estimate of 39.1 million mt, as prices in the global markets surged. The company expects its coal output to rise 4.5% year on year to 10.4 million mt in the January-March quarter.

The price of Indonesian 4,200 kcal/kg GAR rose to $103.95/mt FOB March 30, from $65.45/mt FOB Jan. 3, according to data from S&P Global Commodity Insights. The Newcastle 5,500 kcal/kg NAR coal with 23% ash soared 88% to $194.95/mt FOB in 2022 through March 30.

"If a power plant imports coal at these levels and sells power, then it shall make losses," a Vietnam-based trader said. "For commercial demand, only buyers from South Vietnam are importing barges of Indonesian coal as Australian supply is tight."

Vietnam imported 3.89 million mt of coal between January and February, down 17.9% from the same period a year ago, according to the country's customs data. Vinacomin plans to import 4.7 million mt of coal in 2022 to blend with domestic coal.